CEOs forced from office at lowest level since 2003

London, May 18, 2010 – The number of company chief executives forced from office in 2009 fell to 3.3% in nearly every country and region globally—its lowest level since 2003, according to this year’s annual study by Booz & Company - the tenth annual survey.

  • Trends over ten years:
    • CEOs and Chairmen roles more likely to be split
    • Insiders more likely to be hired
    • CEOs now need to deliver more and faster

However, total rates of CEO succession at the world’s 2,500 largest companies held steady at a high annual rate of 14.3%, a level at which CEO turnover seems to have plateaued during the past five years.

In addition, the report finds three clear trends are reshaping the life of the CEO in the 21st century. First, while succession rates have standardised across regions and industries, boards are more likely to hire insiders. Secondly, the CEO and Chairman roles are more likely to be split and thirdly, CEOs are being asked to deliver results in a shorter period of time.

However, in the UK there has been a notable exception with regard to hiring outsiders. In 2009 the number of outsiders hired as CEO in the UK has shot up by 9.9% while the number of insiders hired has declined by 1.4%.

Last year, overall succession rates including planned and merger-driven departures in the UK peaked at 16% in the middle of the decade but declined to 11.3% in 2009. In North America they fell 2.4% and half a percentage point in Japan, but held stable in Europe and increased 2.3% in the rest of Asia.

Booz & Company’s study of worldwide CEO succession patterns examines the degree, nature and geographic distribution of chief executive changes among the world’s 2,500 largest public companies. This year’s report, CEO Succession 2000-2009: A Decade of Convergence and Compression, analyses the evolution of CEO roles around the globe based on 10 consecutive years of turnover data. It will be published in the Summer 2010 edition of strategy+business, Booz & Company’s quarterly thought leadership magazine, on newsstands May 25, 2010.

Over the decade, CEO succession patterns have converged in three ways, according to Booz & Company:

  • An equalisation of CEO turnover rates, no matter the region or industry. The percentages of CEOs replaced each year in Europe and Asia (excluding Japan) are now at levels closer to those in North America and Japan. Similarly, turnover rates have harmonised across industries, with 10-year averages settling between 12 and 14% for all except telecommunications (16.9%).
  • A trend towards appointing insiders. Boards have picked insiders over outsiders to lead their companies 80% of the time since 2000, not surprising in light of an average 2.5% in relative shareholder returns, compared with an anemic 1.8% for outsider CEOs over the past seven years.

    “Companies that turn to outsiders tend to do worse than those that promote internally, reflecting the fact that strong companies promote from within, and recruiting an outsider isn’t a panacea for turning a company around,” said Richard Rawlinson, Vice President, Booz & Company

  • A separate Chairman. In 2000, roughly half of newly appointed North American and European CEOs held the dual roles of CEO and Chairman. At decade’s end, that number fell to 16.5% and 7.1% for these regions, respectively.

The Booz & Company study found a simultaneous wave of compression reshaping and refocusing the job itself:

  • CEOs must do more, and faster. In just the past decade, boards have shaved nearly two years off the average CEO’s tenure, from 8.1 years to 6.3 years. Moreover, median tenure in office of UK CEOs who were fired was 4 years versus 8.5 years if the departure was planned. And while they are leaving office at about the same age as they have historically, today’s departing CEOs were older when they entered office: 53.2 years for those who exited in 2009 versus 50.2 for those who exited in 2000.
  • More chiefs are “apprentices.” Having split the roles of Chairman and CEO, North American and European companies are increasingly appointing the outgoing CEO as Chairman to apprentice the incoming leader. However, the “apprenticeship” model does not produce consistently superior returns. In fact, on average, apprenticed CEOs underperformed non-apprenticed CEOs by 0.9% per year over their tenure as CEO.
  • No excuses for poor performance. CEOs forced from office significantly underperformed those leaving on their own terms. Never was this more dramatic in the past decade than 2009, when chiefs departing on a planned basis delivered median relative shareholder returns of 6.0% compared with -3.5% for terminated CEOs.

“New CEOs have fewer years in the role than their predecessors,” said Richard Rawlinson of Booz & Company. “They need to balance clarity and boldness with a realistic understanding of what is possible in their organisations.”

To that end, the report outlines four steps that today’s incoming CEO class needs to be successful. Chief executives need to:

  1. Focus on what no one else can do and wisely delegate the rest. Regardless of the company, that will include adjudicating what issues to work on and what’s assigned to others. Also, if big strategic changes are necessary, they can only come from the top.
  2. Engage the board as a strategic partner, which means both treating its members as they want to be treated while simultaneously leading it to be bolder than it otherwise may be.
  3. Find the right pace of change within the company. While every CEO must traverse the learning curve quickly, making premature pronouncements about changes can create otherwise avoidable problems.
  4. Build on peer connections for information, influence and insights. The strength and caliber of those connections can be the determining factor in whether a company has a strong or weak culture.

Additional study findings:

  • Of the 357 succession events that occurred in 2009, 228 were planned (retirement, illness, long-expected changes), constituting the bulk of departures, particularly in Japan (84%) and North America (71%). There were 83 forced departures (where a board removes a CEO for poor financial performance, ethical lapses or irreconcilable differences), and 46 were driven by mergers.
  • Financial services is currently the most volatile industry for CEO turnover. In 2009, the rate of financial services CEOs leaving office was 17.2%— well above the 14.3% global average and significantly higher than the industry’s average turnover rate over the past decade. The rate of forced departures was also well above the norm (5.3% vs. 3.3%). By contrast, CEOs in healthcare enjoyed the greatest stability in 2009, with an overall 10.3% turnover rate and only 0.6% of CEOs forced from office.
  • Telecommunications, however, stands apart from other industries in terms of its 10-year turnover rate (16.9% vs. 13.6% average), and its share of forced turnover (54%) — by far the highest of the 10 industries assessed, and the only industry in which forced turnover is greater than that of planned succession.


This study identified the world’s largest 2,500 largest public companies, defined by their market capitalizations (from Bloomberg) on January 1, 2009. To identify companies among the top 2,500 that had experienced a chief executive succession event, Booz & Company cross-checked data across a wide variety of printed and electronic multi-language sources. Additionally, the company conducted electronic searches for announcements of retirements or new appointments of chief executives, presidents, managing directors and chairmen. For a listing of companies that had been acquired or merged in 2009, Booz & Company used Bloomberg. Booz & Company also conducted supplemental research for regional CEO changes not identified by other sources. Total shareholder return was sourced from Bloomberg and includes reinvestment of dividends (if any). Total shareholder return data were then regionally market-adjusted and annualized.